Why New Low-Rise Home Prices In Ontario May Go Through The Roof

Get ready, prospective buyers -- new low-rise home prices in Ontario could go through the roof.

Already testing affordability limits, higher new home prices could be among the unintended consequences of the provincial government's announcement on May 10 that it is proposing changes to four provincial plans that shape how land is used in the Greater Golden Horseshoe -- Canada's fastest-growing urban region, the province's economic engine and the home of the Greenbelt.

Ontario is responding to input from the public and addressing the recommendations of the report Planning for Health, Prosperity and Growth in the Greater Golden Horseshoe: 2015- 2041 from the Co-ordinated Land Use Planning Review advisory panel, chaired by former mayor of Toronto David Crombie.

In the province's words, the proposed changes to the Growth Plan for the Greater Golden Horseshoe, the Greenbelt Plan, the Oak Ridges Moraine Conservation Plan and the Niagara Escarpment Plan would:

Protect clean water by adding the lands within 21 major urban river valleys to the Greenbelt, along with seven coastal wetlands, and establish a process for further expanding the Greenbelt to protect key water features

Require zoning along transit corridors to provide adequate density to support transit

Establish Greenbelt-level protections for natural heritage systems - such as wetlands, woodlands and rivers - beyond the Greenbelt, with the provincial government taking a lead in mapping those areas

Support agricultural viability and preserve farmland by setting strict requirements for the expansion of urban areas and allowing more flexibility for agricultural use in the Greenbelt

Require municipalities in the Greater Golden Horseshoe to integrate climate change policies into municipal official plans and to conduct climate change vulnerability risk assessments when they are planning or replacing infrastructure.

The problem, according to the Ontario Home Builders' Association (OHBA) and several regional builder groups, is that such a focus on densification will mean everyone pays more for housing. And that means more condos, less choice and higher new home prices for consumers.

HOMEOWNERSHIP MORE DIFFICULT

OHBA, along with its 12 local associations being affected by the Plans, says the announced amendments will continue to make homeownership more difficult for Ontarians.

"This announcement means that you're going to see more intensification, more condos, less choice and higher prices," says Bryan Tuckey, President and CEO of the Building Industry and Land Development Association (BILD), representing the largest of OHBA's locals affected by this announcement.

"The residential construction industry will adapt, as it has in the past," he adds. "It is going to be the residents and new-home buyers that are going to pay the price."

Since the introduction of the Growth Plan in 2006, every housing type has seen significant price increases, OHBA says. For example, the average price of a new condo in the GTA in 2006 was less than $300,000, and today it is more than $459,000. The average price of a new single-family detached home in 2006 was about $439,000, and today is more than $1 million.

"The industry would have liked to see a more measured and cautious approach before significantly increasing intensification targets," says Tuckey. "The industry has been meeting the intensification targets in the 10 years since the provincial Greenbelt and Growth Plans were introduced, building at least as many highrise homes as low-rise homes, and yet the demand for single-family homes has not diminished."

Before increasing intensification, more examination is needed into the dramatic increase in housing prices, Tuckey adds. Supply cannot keep up with demand due to these intensification policies and a lack of serviced developable land.

"(We) also would have liked to hear a provincial commitment to explain to the public and new-home buyers what increased intensification means on the ground. These proposed changes mean more intensification, more condos, more cranes, more congestion, less housing choice and fewer single-family homes."

MORE DENSITY, MORE CONDOS

The proposed amendments to the Growth Plan will see intensification within existing communities in the Greater Golden Horseshoe (GGH) increase from 40 to 60 per cent, which means more density and condos within already highly-concentrated areas. In new communities not captured in the existing areas, densities for newly built neighbourhoods will increase from 50 persons and jobs per hectare to 80 persons and jobs per hectare. At this time, these new communities do not have the necessary infrastructure in place to support these density targets, OHBA says.

Traffic congestion is already a serious problem in the Greater Toronto and Hamilton Area (GTAH), and more intensification will make it worse unless there are massive public investments in infrastructure. The current financing system disproportionately places the brunt of paying for these infrastructure projects on new-home buyers, builders say.

"Hamilton will benefit from Ontario's investment in a LRT line, but that is nearly a decade away," says Suzanne Mammel, executive officer of the Hamilton-Halton Home Builders' Association (HHHBA). "In the meantime, we need more new housing supply to support our growing city and region if we are going to unlock our economic potential."

With 100,000 people joining the GTAH every year, the Growth Plan is where Ontario will house the majority of the additional 4.5 million new residents and attract nearly two million new jobs by 2041.

"Creating a smart Greenbelt by adding river valleys and other significant environmental features will improve our quality of life by connecting the dots between the Greenbelt and Growth Plan," says OHBA CEO Joe Vaccaro. "We need to build new communities where residents have housing choice with access to greenspace, good public transit and jobs."

Says Tuckey: "It's clear the government is not concerned with the price of housing in the GTA. BILD has presented recommendations as well as a growing body of research and data showing a strong correlation between restrictive land use policy and increasing home prices.

"Governments are exasperating increasing house prices by piling on development charges; hiking fees and adding more regulations that cost time and money."

Despite such concerns from the industry and consumers, it may not be too late. Stakeholders and the public can comment on the proposed changes.